Paxson travels light

Landmark sells cable net for $75 mil

NEW YORK — Paxson Communications Corp. agreed Monday to buy the Travel Channel for $75 million in stock and cash from Landmark Communications Inc., the companies said.

The acquisition takes Paxson chairman Bud Paxson back into cable programming, an area he knows from his days as founder of Home Shopping Network.

Paxson, who now runs a string of TV and radio stations, promised Monday to revitalize Travel by spending money on new programming and improving its distribution by offering cable operators equity in the channel as well as cash subsidies.

Wall Streeters said Paxson is getting a good deal for Travel, particularly given the high prices being paid for cable networks currently. Travel, which launched in 1987, has been stuck at the 20 million subscriber count for some time, and breaks even in financial terms. Unprofitable cable networks are usually valued at about $15 a subscriber, which puts a value of $300 million on Travel.

But Travel’s carriage agreements are relatively short-term, mainly one to two years, although some can be canceled immediately, which reduces the network’s value, investment bankers say.

Paxson said he got a “great bargain,” given prevailing prices for cable networks, but noted that because Travel doesn’t make any money, “it was only worth what you were willing to pay for it.” He added that Paxson will have to pour a lot of money into the network to improve its programming, which he describes as “tired and old.”

“I would not be surprised if we spend on programming in the next 12 months a sum of money equal to the current operating costs,” Paxson said, declining to quantify either figure.

In addition to overhauling the programming, Paxson says it wants to build up a travel shopping business through Travel Channel’s Internet site. “We are somewhat familiar with travel transactions, and we intend to capitalize on that,” he said.

The acquisition, to be paid for in an issue of stock to Landmark equivalent to about 8% of Paxson’s outstanding stock and cash of $20 million, is Paxson’s second major purchase in a month. In mid-May the company agreed to buy WBIS-TV in New York for $257 million from Dow Jones & Co. and ITT, a deal which will close at the end of June. Paxson stock fell 31¢ to $11.06 Monday.

Paxson downplayed suggestions that he is planning further forays into cable programming. “We don’t have any other ideas at the present time,” he said.

Paxson also refused to detail the offers that he would make to improve distribution. He said Paxson would work out its business plan and carriage terms over the next 40 days, the time before the acquisition closes.

Landmark is left with the Weather Channel, as well as a U.K. and Latin American version of Travel. Landmark execs did not return calls seeking comment about its future strategy.